Mortgage Stamp Tax

[Snaggletooth]

In all states I have knowledge (like 4-5 of them), the state levies a "Stamp Tax" on Mortgages. Typically, this is like 1/2 of 1%, or some small fraction of the mortgage.

Prevailing wisdom says this tax is not deductible as a "tax" on Schedule A. However, in determining whether a tax is deductible or not, one of the criteria is whether the tax is based on a value, or whether it is simply a fee or something else NOT related to value. This is why Ad Valorem taxes are deductible in states that have them.

I wonder if anyone has gone to court or had a ruling on the deductibility of "Stamp Taxes."
I'm sure the govt would argue that the tax base is the value of the mortgage and not the value of the real estate.

However, if there is no value of real estate, how can there even BE a mortgage? In "real world" the higher the cost of the home, the greater the mortgage. It would appear a de facto ruling would establish that for all practical purposes, state stamp taxes are in fact a tax based on value. Such a ruling would render Stamp Taxes deductible on schedule A, unless they are prohibited by statute in code or regulations. (Even regulations can be contested if they are found to be not in concert with code)

What about it?

[oceanlovin'ea]

Hey, Snag

I can't believe that someone was up later than me last night posting on this board.

I was up till 2 am. Then I gave up and went to bed. This has to be one reason for not having an office in your home.

Linda F

[rosieea]

I'm sure the govt would argue that the tax base is the value of the mortgage and not the value of the real estate.

Well, it IS based on the value of the mortgage, isn't it. I mean, wouldn't the amount of Stamp Tax go down, if I made a larger downpayment?

[Bees Knees]

In Sleiman, T.C. Memo 1997-530, the court said the documentary stamp tax was levied on the mortgage. Therefore, it had to be amortized over the life of the mortgage. The case dealt with investment property, not a personal residence. So for investment property purposes, you amortize the tax similar to points.

[Unregistered]

adds to basis

I though it had to add to basis per QF.

[Snaggletooth]

Thanks

...for everyone's input. Most of the responses, however, deal with a business mortgage and do not address whether the stamp tax could be a Schedule A deduction.

In the "old" days (geez wonder how many old fogeys like me are still around...), it was OK to deduct ANY tax. Then came the 1986 tax code rewrite. Thitherthence, a tax had to be based on VALUE to be deducted on a Schedule A.

By definition, the stamp tax is based upon the value of the mortgage, however, for all practical purposes the mortgage is based upon the value of the real estate. Yes, there can be varying amounts of down payments or other equity transfers. But these only serve to reduce the amount of stamp taxes. I maintain that the stamp tax is based on value by surrogate in a secondary relationship.

I have been deducting stamp taxes on Schedule A, even though I've been told not to. In my part of the country, usually much much less than $1000.

[JG EA]

Transfer tax

A stamp tax is like a transfer tax (as far as I know) and is added to closing costs that add to basis.